But that doesn't come close to measuring its true cost. The bill uses various accounting gimmicks to hide its true cost. For example the bill doesn't include more than $200 billion needed to prevent a 21 percent cut in Medicare next year. [The CBO "score" actually assumes Reid cuts Medicare 23 percent -- Ed.] That cost has been spun off into a separate bill, even though the Senate voted down that approach last month.

Moreover (as Jeffrey H. Anderson notes), much of the spending is back-loaded. The bill doesn't start spending until 2014, and only costs $9 billion that year. But by 2019, the annual cost hits $196 billion. The minority staff of the Senate Budget Committee reports that, if you factor out all the budget gimmicks and look at the 10 years of actual implementation, the cost is closer to $2.5 trillion.

And, while Reid brags that the bill will reduce the deficit by $127 billion over the next 10 years (which is about $50 billion less than the deficit the government ran last month alone), even that tiny savings depends on budget gimmicks and the willingness of future Congresses to make huge cuts in Medicare spending. Any wagers on the chances of that actually happening? In fact, even the CBO warns that it will be "difficult" to achieve the predicted savings.

Perhaps more important, much of the cost has simply been shifted from the federal budget onto the backs of workers, businesses and state governments. Judging by previous reforms, as much as 60 percent of the cost won't show up in government accounting.

To pay for all the new spending, Reid would enact at least 15 new or increased taxes totaling more than $493 billion.

But the cost alone doesn't begin to describe how intrusive this bill would be for the average American. For instance, it would require everyone to buy a government-designed insurance plan, even if it was more expensive than their current policy. Failure to comply brings a penalty of up to $6,750 for a family of four.

Another provision would mandate that employers provide insurance to their workers. If they fail to do so, and if even a single worker qualified for federal subsidies, the employer could be fined up to $750 per employee. The CBO estimates that those penalties will amount to more than $28 billion.

Unemployment is now 10.2 percent, and the Senate bill will make it more costly to hire workers. And because the penalty only applies in the case of subsidy-eligible workers, it is low-wage and unskilled workers that will suffer the most.

Of course, the plan contains the government-run "public option" that many experts believe will ultimately crowd out private insurers. And don't be misled by Reid's "opt-out" provision: It comes with so many restrictions that it will be nearly impossible for a state to actually opt out.

Besides, there won't be any opting out of the taxes that will ultimately be necessary to pay for it.

Finally, the bill sets the stage for government-imposed rationing. If you think the recent controversy over mammograms is something, just wait until the dozens of new boards, commissions and agencies created by this bill get to work. The "reform" also gives the secretary of Health and Human Services broad new powers to determine "quality," "efficiency" and "appropriate utilization."

At first, these restrictions would only apply to government programs like Medicare, but they'd create the framework for eventual extension to private insurance.

If Reid gets the 60 votes he needs to pass this, US taxpayers, businesses and patients can expect to pay a high price for this congressional feast.

As Larry Summers, the president's top assistant for economic policy, noted in July, "the unemployment rate over the recession has risen about 1 to 1.5 percentage points more than would normally be attributable to the contraction in GDP." And the rate has moved nearly a percentage point higher since then, even though GDP increased. Countries with much deeper declines in GDP, such as Germany and Sweden, have unemployment rates far below ours.

Summers knows why the US rate is so high. He explained it well in a 1995 paper co-authored with James Poterba of MIT: "Unemployment insurance lengthens unemployment spells."

That is: When the government pays people 50 to 60 percent of their previous wage to stay home for a year or more, many of them do just that.

And the stimulus bribed states to extend benefits — which have now been stretched to an unprecedented 79 weeks in 28 states and to 46 to 72 weeks in the rest. Before mid-2008, by contrast, only a few states paid jobless benefits for even a month beyond the standard 26 weeks.

When you subsidize something, you get more of it. Extending unemployment benefits from 26 to 79 weeks was guaranteed to leave many more people unemployed for many more months.

And longer unemployment translates to higher unemployment rates — because the relatively small numbers of newly unemployed are added to stubbornly large numbers of those who lost their jobs more than six months ago.

Until benefits are about to run out, many of the long-term unemployed are in no rush to make serious efforts to find another job — or to accept job offers that may involve a long commute, relocation or disappointing salary and benefits.

(Incidentally, the "mercy" of longer benefits does no long-term favors: The literature is quite clear that a prolonged period on unemployment tends to depress income for years after you finally go back to work.)

The median length of unemployment hovered around 10 weeks for six months before February's "stimulus" plan. Since half the unemployed found jobs within 10 weeks, more than half of those counted among the unemployed in one month would no longer be included three months later. In other words, more frequent turnover among the unemployed held down monthly unemployment.

But after February, with jobless benefits stretched out to 46 to 79 weeks, the median duration of unemployment nearly doubled, reaching 18.7 weeks by October.

The unemployment rate has not been rising because of growing numbers of newly jobless people. Indeed, initial claims for unemployment benefits are way down. And the number of unfilled private job openings increased by 9.3 percent from the end of April to the end of September.

The unemployment rate has been rising because unprecedented numbers of those who became unemployed six to 19 months ago are remaining "on the dole" until their benefits are nearly exhausted.

Summers isn't the only administration economist who understands this very well. Assistant Secretary of the Treasury for Economic Policy Alan Krueger co-authored a 2002 survey of the topic with Bruce Meyer of the University of Chicago. They found that "unemployment insurance and worker's compensation insurance . . . tend to increase the length of time employees spend out of work." Last August, Krueger and Andreus Miller of Princeton also found that "job search increases sharply [from 20 minutes a week to 70] in the weeks prior to benefit exhaustion."

Similarly, Meyer found "the probability of leaving unemployment rises dramatically just prior to when benefits lapse." In other words: If you extend benefits to 79 weeks, many people won't find an acceptable job offer until the 76th or 78th week.

Meyer and Lawrence Katz of Harvard estimated that "a one-week increase in potential benefit duration increases the average duration of the unemployment spells . . . by 0.16 to 0.20 weeks." Apply that formula to the 20-to-53-week extension we've seen, and you get an average of three to ten more weeks spent on unemployment. And, sure enough, the average unemployment spell has risen by seven weeks this year — to nearly 27 weeks by October.

Katz also found that extended benefits, by making it easier for workers to wait and see whether they get their old jobs back, also makes it easier for employers to delay recalling laid-off workers. Just before unemployment benefits run out, Katz found "large positive jumps in both the recall rate and new job finding rate."

The White House recently made the mysterious claim of having "saved" 640,329 jobs, at a cost of only $531,250 per job ($340 billion).

In reality, the evidence is overwhelming that the February stimulus bill has added at least two percentage points to the unemployment rate. If Congress and the White House hadn't tried so hard to stimulate long-term unemployment, the US unemployment rate would now be about 8 percent and falling rather than more than 10 percent and — rising.

The House of Representatives has now passed its version of health care reform — a gargantuan 2,000-page, 70-pound collection of mandates, regulations, and subsidies that may well be among the most expensive pieces of legislation in U.S. history.

When the bill was first introduced, the Congressional Budget Office estimated that it would cost $1.1 trillion over the next 10 years. However, as is the way with government programs, that cost has already begun to grow. By the time the "managers amendment" and certain provisions had been added to the bill, the final product was projected to cost more than $1.7 trillion.

In theory, this increase in spending would be partially offset by $628 billion in Medicare cuts, giving the bill a "net" cost of slightly more than $1 trillion. But how likely is it that those cuts will take place? After all, this is an administration that is paying seniors $250 to make up for the fact that they didn't get a Social Security cost-of-living increase this year (because the cost of living didn't increase). And Congress is in the process of repealing a scheduled increase in Medicare premiums.

To see how this may play out, look what Congress is doing about the so-called "doc fix."

Under current law, there is supposed to be a 21 percent cut in reimbursements to Medicare providers next year. But no one in Washington seriously believes that Congress will let that happen. In fact, those cuts have been supposed to take place every year since 2003. And every year Congress postpones them until the following year.

However, in order to pretend that their bill costs less than it actually does, the Democrats simply assume that this time Congress will let those cuts take effect. Then, in an unparalleled display of cynicism, they have introduced a separate bill repealing those cuts at a cost of $200 billion.

That means that the cost of the "doc fix" isn't technically part of health care reform. And your household budget would look so much better if you didn't have to pay your mortgage and car payment. (The Senate tried to do something similar, only to have the cynical ploy rejected 53-47, with 13 Democrats refusing to play along.)

Moreover, the CBO provides 10-year projections of a bill's cost, between 2010 and 2019 in this case. Yet, while the taxes and other revenue measures in the bill kick in immediately, most of the spending doesn't take effect until 2014.

So the "10-year" cost projection includes only six years of the bill. Wouldn't it be great if you could count a whole month's income, but only two weeks' expenditures in your household budget?

If we look at the bill more honestly over the first 10 years that the programs are actually in existence, say from 2014 to 2024, it would actually cost nearly $3 trillion.

There has been a lot of talk recently about "bending the curve" of health care spending, but as the actuaries at the Centers for Medicare and Medicaid Services (CMS) recently noted, the House bill bends the curve in the wrong direction — increasing government health care costs.

All this new spending will be accompanied by equally massive federal tax hikes, roughly $500 billion over the first 10 years — $770 billion if the penalties for failing to comply with the mandate are included.

Furthermore, much of the bill's cost is shifted off the federal books onto businesses, individuals, and state governments. These business and individual mandates are the equivalent of tax increases, but those costs aren't included in the bill's cost estimates.

Under the House bill, many small businesses that do not currently provide health insurance would have to do so, or they may face a new tax of up to 8 percent of payroll. Other businesses that do offer insurance, but whose benefits are not as comprehensive as the government mandates, will have to purchase new, more expensive policies. This cost may not be included in a CBO "score," but it is a very real cost for businesses — especially at a time of 10.2 percent unemployment.

Similarly, individuals will also have to buy insurance that meets the government's minimum benefit standards or pay up to 2.5 percent of their income as a penalty. That added burden is a cost, too.

So is the cost of increased insurance premiums — and nearly everyone agrees that insurance premiums will go up under reform, especially for younger and healthier people.

And state governments will have to pick up at least part of the cost for the bill's Medicaid expansion. In fact, already strapped states could have to come up with as much as $34 billion.

This is all taking place at a time when the government is facing an unprecedented budgetary crisis. The U.S. budget deficit hit $1.4 trillion in 2009, and we are expected to add as much as $9 trillion to the national debt over the next 10 years, a debt that is already in excess of $12 trillion and rising at a rate of nearly $4 billion per day.

Social Security will begin running deficits in 2016, and Medicare even sooner than that. Under current projections, government spending will rise from its traditional 20-21 percent of our gross domestic product to 40 percent by 2050. That would require a doubling of the tax burden just to keep up.

Add a multi-trillion-dollar health care bill on top of that, and we risk permanently damaging our economy and leaving our children and grandchildren an unconscionable burden of debt and taxes.

There is now widespread consensus that our health care system needs some kind of reform.

But surely it must be possible to control health care costs, improve quality, and extend coverage to more people without bankrupting the nation.

Health care reform now goes to the Senate. There are 3 trillion reasons to hope they are not as fiscally reckless as their counterparts in the House.

When Democrats announced the bill, House Speaker Nancy Pelosi claimed the bill cost only-only!-$894 billion over the next ten years. But outside analysts, including the Congressional Budget Office, suggest that the real cost will be far, far higher.

The CBO, for example, points out that the bill would actually increase government spending by slightly more than $1 trillion. Democrats reported a lower "net" number by subtracting revenues from penalties paid by individuals and businesses that fail to comply with the bill's insurance mandate. But even that does not reflect the bill's true cost.

The Democratic leadership simply shifted some of the bill's cost to other bills. For example, for purposes of the health care bill, the Democrats assume that a currently scheduled 21 percent cut in Medicare reimbursements will take affect next year. However, at the same time, they have introduced a separate bill repealing those cuts at a cost of $250 billion, so that cost isn't technically part of health care reform. And your household budget would look so much better if you didn't have to pay your mortgage and car payment. (The Senate just tried to do something similar, only to have the cynical ploy rejected 53-47, with 13 Democrats refusing to play along.)

If you count that cost honestly, the bill's cost rises to nearly $1.3 trillion. And that still understates the bill's cost.

The CBO provides ten year projections of a bill's cost, between 2010 and 2019 in this case. But most provisions of the health bill don't take effect until 2014. So the "10-year" cost projection only includes six years of the bill. Again, consider your household budget. Wouldn't it be great if you could count a whole month's income, but only two weeks expenditures? If we look at the bill more honestly over the first 10 years that the programs are actually in existence, say from 2014 to 2024, it would actually cost more than $2.3 trillion. And, this doesn't include approximately $200 billion in additional spending for public health programs, a reinsurance program for retiree health care, and new preventive care programs that was added to the bill after it was submitted for official "scoring." So call the total cost somewhere in excess of $2.5 trillion.

There has been a lot of talk recently about "bending the curve" of health care spending, but as the actuaries at the Centers for Medicare and Medicaid Services (CMS) recently noted, the House bill bends the curve in the wrong direction — increasing government health care costs.

All this new spending will be accompanied by equally massive federal tax hikes, roughly $500 billion over the first 10 years, $700 billion if the penalties for failing to comply with the mandate are included.

Furthermore, much of the bill's cost is shifted off the federal books onto businesses, individuals, and state governments. These business and individual mandates are the equivalent of tax increases, but those costs aren't included in the bill's cost estimates. Nor is the cost of increased insurance premiums, though nearly everyone agrees that insurance premiums will go up under reform, especially for younger and healthier people. And state governments will have to pick up at least part of the cost for the bill's Medicaid expansion. In fact, already strapped states could have to come up with as much as $34 billion.

And, it could get worse. The bill promises to pay for part of the cost with $500 billion in cuts to Medicare over the next 10 years. But how likely is it that those cuts take place? After all, this is an administration that is paying seniors $250 to make up for the fact that they didn't get a Social Security cost of living increase this year (because the cost of living didn't increase). And, Congress is in the process of repealing a scheduled increase in Medicare premiums.

If those cuts don't happen, that just means more taxes or more debt passed on to our children and grandchildren.

So far much of the debate over health care reform has been focused on the details of the bill. But, eventually the public is going to notice the price tag. When they do, House Democrats, especially those who claim to be fiscally responsible Blue Dogs, may have a lot of explaining to do.

A billion dollars here, a trillion there, and pretty soon it adds up to real money.

Research finds more evidence for the efficacy of monetary as opposed to fiscal policy in ending recessions. And the studies on fiscal stimulus have shown more impact from tax cuts than from spending increases.

We also do not know whether the positive G.D.P. growth resulted partially or mainly from natural equilibrating mechanisms, rather than from monetary or fiscal policy. Much discussion of the recession presumes it will end only because government comes to the rescue.

In fact, the U.S. economy recovered from significant recessions before 1914, when monetary and fiscal policy had not even been invented. Economies can and do recover on their own, and intervention might make things worse by generating uncertainty and distorting the economy's allocation of resources.

A further caveat is that two elements of the fiscal stimulus — cash-for-clunkers and the $8,000 tax credit for first-time home buyers — probably shifted significant activity from the fourth quarter and beyond to the third quarter because consumers knew these provisions would expire soon. Thus the stimulus plausibly shifted the timing of economic activity without necessarily improving the long-term path.

The case for additional stimulus is weak. If further stimulus occurs, it should focus on changes in policy that make sense independent of the recession. This means reductions in tax rates rather than increases in expenditure. Repeal of the corporate income tax would be ideal.

Take Medicare, for example. The Democrats would have us believe that they can cut $500 billion from Medicare spending over the next 10 years without anyone getting less of anything. They are going to save that money, the president says, by eliminating "fraud, waste, and abuse." Undoubtedly that would be the same fraud, waste and abuse that presidents have been eliminating since at least, say, Ronald Reagan.

But, contrary to the president's rhetoric, the bills that Congress is currently debating do cut Medicare.

For example, roughly 10.2 million seniors currently receive their health care through the Medicare Advantage program. That program offers many seniors benefits not included in traditional Medicare, including preventive-care services, coordinated care for chronic conditions, routine physical examinations, additional hospitalization, skilled nursing facility stays, routine eye and hearing examinations, and glasses and hearing aids. The bills currently making their way through Congress would cut payments to Medicare Advantage plans by $100 billion to $150 billion. In response, many insurers are expected to stop participating in the program, while others will probably increase the premiums they charge seniors. Millions of seniors will likely be forced off their current plans and back into traditional Medicare. The Congressional Budget Office makes it clear that, at the very least, the cuts "would reduce the extra benefits that would be made available to beneficiaries through Medicare Advantage plans."

The Democratic cuts also hit traditional Medicare. For example, the bills would reduce reimbursements for diagnostic imaging — things like CT scans, MRIs and X-rays — by as much as 25 percent. And the Senate Finance Committee's bill would penalize doctors who perform too many procedures or tests. Providers whose utilization is in the 90th percentile or above, compared to national averages, will have their Medicare reimbursements cut. The whole point of such provisions is to reduce services.

On top of that, the Senate Finance Committee assumes that there will be a 21 percent across-the-board reduction in what Medicare pays providers. This cut is scheduled under current law and is not technically part of the health care bill, but most observers had expected Congress to defer those cuts, as they have every year since 2001.

And the Republicans? They've reacted with the least-convincing outage since Inspector Renault discovered there was gambling going on at Rick's. Republican Party chairman Michael Steele issued a Seniors' Health Care Bill of Rights promising to "protect Medicare and not cut it." Hardly a day seems to pass without some House or Senate Republican vowing to save Medicare from the Democratic axe.

Having been on the receiving end of "Mediscare" politics so many times, it is probably comforting for Republicans to try turning the table for a change. But their outrage ignores the fact that back in February, these same Republicans proposed even bigger Medicare cuts as part of their alternative budget.

So who is really going to cut Medicare benefits?

The truth is that, depending on which set of accounting measures is used, Medicare is facing unfunded liabilities of $50 trillion to $100 trillion. Yes, that's trillion, with a "T." As a percentage of GDP, Medicare costs are expected to rise from 2.7 percent today to 9.4 percent by 2050. We cannot and will not continue to pay all promised future Medicare benefits.

Of course, there are differences about how future cuts would be made and what we should do with the money. Democratic plans to simply plow the money back into a new government health care program, for example, would do nothing to help our long-term fiscal problems.

The fact is, no matter what they say, Democrats are going to cut Medicare and so are Republicans.

Wouldn't it be nice if we had a politician, from either party, with the courage to tell us the truth?

The pathologies of federal spending programs are examined on a new Cato Institute Web site, www.downsizinggovernment.org. Programs in every federal department suffer from fraud, cost overruns, and other types of mismanagement. And many federal programs are ineffective or actually cause damage to society.

Fraud is rife throughout the government's array of 1,800 different subsidy programs, including health programs. For Medicare and Medicaid, as much as 20 percent of spending disappears into a black hole of improper payments, according to Malcolm Sparrow of Harvard University. That amounts to more than $100 billion of annual health spending being essentially flushed down the drain.

Here's one egregious example: Over four years ending in 2008, a high school dropout in Miami with a laptop computer was able to single-handedly cheat Medicare out of $105 million by electronically submitting 140,000 fraudulent claims for equipment and services. With that sort of abuse endemic in federal health programs, do we really want to expand them further?

Another spending pathology is cost overruns. Highway construction, defense procurement, and other federal spending projects often cost far more than budgeted. For example, Boston's Big Dig highway project - which was mainly funded by federal taxpayers - was overwhelmed by poor management and ended up costing five times more than promised.

Cost overruns have also plagued federal health programs. When Medicare's Part A was launched in 1965, it was projected to cost $9 billion by 1990, but ended up costing $67 billion. When Medicare's home-care benefit was added in 1988, it was projected to cost $4 billion in 1993, but ended up costing $10 billion.

It's the same for Medicaid. When that program's special hospitals subsidy was added in 1987, it was supposed to cost $100 million annually, but within five years it was costing $11 billion annually. So when the Democrats today promise that their health-care plan will cost $1 trillion, taxpayers had better hold onto their wallets because it's likely to end up costing much more.

Aside from high costs, many federal programs don't produce the promised results. Let's be bipartisan and pick on a Republican program this time - George W. Bush's No Child Left Behind education plan. Under Bush, federal education spending doubled in eight years, yet U.S. student achievement has generally not improved.

Other programs, while well-intended, have inadvertently created damage to the economy. For years, both Republican and Democratic administrations promoted housing subsidy programs to boost home purchases by high-risk borrowers. But after the recent housing bubble and bust, we now know that those subsidies were a huge mistake.

Federal programs can create social damage as well as economic damage. Consider public housing. The federal government pumped hundreds of billions of dollars into projects over the decades, but the results have often been disastrous. Many housing projects became dens of crime and disorder, and the harmful effects often spread to surrounding neighborhoods. Yet the government still spends billions of dollars a year on public housing.

Some federal subsidy programs harm the environment. Farm subsidies induce farmers to overuse marginal farm land and sugar subsidies spur excessive sugarcane cultivation in Florida, which has damaged the Everglades. And for those who think that big corporations are the worst polluters, they should study the appalling environmental damage done at federal nuclear weapons sites. Taxpayers are spending billions of dollars every year cleaning up that mess.

Perhaps the most serious problem with federal spending is that programs squelch the development of new and diverse solutions to society's problems. In health care, government intrusion has pushed up the cost of private insurance and squeezed out private health alternatives. For example, about half of the elderly already had health insurance before Medicare was enacted in 1965. But Medicare killed that market and also killed any chance that state governments or entrepreneurs would introduce their own health solutions for the elderly.

The men who came to Philadelphia in 1787 to frame a new government believed that federal functions should be "few and defined," with most activities left to the states and the private sector. They didn't believe that one-size-fits-all federal spending programs made sense for a vast and diverse nation.

History has proved them correct. So rather than imposing another grand health-care scheme on the country, federal policymakers should focus on removing obstacles to bottom-up innovations that could more efficiently fix our health-care markets.

And it's undeniably an improvement over the bill approved early by the Senate Health, Education, Labor, and Pensions Committee, or the one making its way ever so slowly through the House.

But that's a low bar. In reality, the Finance Committee bill still represents a radical government takeover of the U.S. health care system.

Let's start with the price tag. According to the report just released by the Congressional Budget Office, the bill will cost roughly $829 billion over the next 10 years. And, significantly, it is even projected to reduce the budget deficit over 10 years by $81 billion. Of course, both those numbers are misleading.

The $829 billion cost is for the next 10 years, 2010-2019, but the most expensive provisions of the bill don't take effect until July of 2013. The cost over the bill's first 10 years of actual operation is closer to $1.3 trillion.

In addition, the bill assumes that Congress will implement a 21% reduction in Medicare payments that is already scheduled under current law. The only problem is that Congress has been supposed to make those reductions since 2003 — and never has. There is no reason to believe it will do so this time either.

Most importantly, the bill does not achieve its deficit reduction by controlling spending or reducing health care costs. In fact, by the end of the 10-year budget window, the cost of the program is expected to be growing at 8% per year. But revenue from the bill's new taxes would be growing between 10% and 15% per year.

In particular, the bill imposes a 40% excise tax on health insurance plans that offer benefits in excess of $8,000 for an individual plan and $21,000 for a family plan. Insurers would almost certainly pass this tax on to consumers via higher premiums.

As inflation pushed insurance premiums higher in coming years, more and more middle-class families would find themselves caught up in the tax — providing the government with more revenue.

The overall tax increases in the bill are more than double the amount of deficit reduction. This isn't a health care efficiency bill or a cost-containment bill. It is a tax-and-spend bill, pure and simple.

And, when not raising taxes, the bill simply pushes costs on to others. For example, the bill would push $35 billion in Medicaid costs off onto already cash-strapped state governments. Other costs would be offloaded onto businesses and individuals.

Nor should it be forgotten that this bill would still give the government the power to force most Americans to purchase insurance, and allow the government to dictate what benefits insurance should offer.

People who have health insurance today — and like it — would have to switch to the government-approved plan, even if it was more expensive or contained benefits that they didn't want. That insurance will likely be more expensive, because the bill contains a host of new insurance regulations that will drive up premiums, especially for the young and healthy.

Others could lose their current insurance as well, including the 10 million Americans with health savings accounts (HSAs) and the one in five seniors currently on Medicare Advantage plans. The bill guts both programs.

Numerous other provisions would allow the government to interfere with how doctors practice medicine — for example, cutting Medicare reimbursements to providers whose utilization is in the 90th percentile or above compared to national averages, that is, doctors who do more procedures than the government thinks they should.

With all this, the bill still leaves 25 million people uninsured.

If that's moderation, it's just not good enough.

There are several ways to see if it is working as advertised. First, what did the proponents say would happen when they were pushing the plan versus what has happened? Second, how has the United States fared compared to other nations that had smaller or no stimulus programs? Third, how have the results to date compared to what pro-stimulus, Keynesian-school economic theorists advocated versus what other theorists (principally Austrian-school) who largely opposed the stimulus plans said?

U.S. unemployment already has reached 9.8 percent, with 15.1 million Americans unemployed, and more than 7.1 million jobs have been eliminated since the beginning of the recession. President Obama's economic advisers said in the beginning of this year that the unemployment rate would rise to 9 percent with no stimulus package and would only rise to a maximum of 7.9 percent with the stimulus bill, peaking during this past summer. Stimulus proponents clearly have failed the first test (despite Vice President Joseph R. Biden Jr.'s revisionist statements) and there is zero evidence for their claims that more jobs would have been lost without the stimulus package.

One might argue that the stimulus had worked if the results in the United States were better than in other countries that had smaller or no stimulus packages. The recession has been global, and every country has been affected negatively. Only Great Britain attempted to put in a stimulus package that was relatively as large as the U.S. package. A crude measure of economic stimulus is the size of the deficit relative to gross domestic product. During recessions, tax revenues decline in all countries, so most will run a deficit whether they intend to or not. A stimulus package normally contains a mix of government spending increases and tax cuts, resulting in a deliberately larger deficit.

The United States and Britain have by far and away run the largest deficits as a percentage of GDP (i.e. the most stimulus), yet the U.S. and Britain, along with Italy and Russia, had not bottomed out in second-quarter 2009, while the rest of the 10 largest economies were showing real growth in the second quarter. Russia's poor performance is largely a function of relying very heavily on the export of raw materials rather than developing a broad-based economy as all the others in the Big 10 have done.

The three countries with the smallest deficits (the least stimulus) — Brazil, China and Germany — have all turned the corner rather quickly and are growing. German Chancellor Angela Merkel has just announced she is going to push tax cuts, which should give the German economy an additional shot in the arm.

While the data set is too small with the top 10 countries (which collectively account for a large majority of the world's GDP) to draw definitive conclusions, the existing evidence indicates that a big stimulus package seems to delay recovery, while little stimulus leads to a quick return to economic growth.

Finally, what do the competing economic theorists say? The Keynesians say that if the government increases spending to stimulate demand and create jobs for those who do not have them, this should lead to a less painful downturn and a quicker recovery. The Austrian (aka Hayekians) free-market sorts say recoveries occur on their own once asset and labor prices fall from inflated levels of the previous boom and excess inventories are worked off. This usually happens within 16 months unless government attempts to mitigate these necessary price adjustments, which will delay the recovery. (Apologies to both my Austrian and Keynesian friends for trying to summarize their views in one short paragraph.)

The Keynesians never really get a fair test of their theory because politicians always take the Keynesian notion that it is OK to increase government spending as a license to spend the extra money on themselves and their friends rather than on those who might actually benefit. (This self-dealing process is well explained by the public-choice school of economics.) A few examples from the current stimulus program should suffice. Congress increased spending on itself last year by 10.9 percent and by another 5.8 percent this year for a grand total of $4.7 billion. (Remember, it was just 15 years ago when the Gingrich Republicans ran against the "billion dollar Congress.") Given that the number of members of Congress remains fixed at 535, why should their budget go up any faster than inflation?

Congress and the administration also have gotten into the venture capital business, which enables them to dump infinite quantities of money into their rich friends' pockets. Bill Frezza, a principled venture capitalist, using Fox News and other venues, has been blowing the whistle on these unsavory and destructive practices. Did you know that Al Gore and friends just received almost $600 million to develop another expensive ($88,000) hybrid electric sports car with your tax money? The chances of taxpayers getting their money back are less than of General Motors Corp. and Chrysler paying off all their loans, which is close to zero. Paradise defined: being politically well-connected when stimulus money is around.

The only things one can say for sure about stimulus money is that it will add to the deficit, ultimately driving up interest rates and taxes; and much of it will be wasted and/or stolen, neither of which benefits the unemployed. By any objective measure, the stimulus program has been and will continue to be a failure — but don't expect the Washington politicos ever to admit it.

Let them get away with something like that, and before you know it they'll be demanding honest accounting practices — sending the whole legislative process to hell in a hand basket.

When it comes to the health-care-reform debate, you see, honest budgeting is nowhere to be seen.

Start with the simple matter of how much health-care reform will cost. The House bill, HR 3200, will cost roughly $1.3 trillion over 10 years — or so we're told. By the same token, the Senate Finance Committee bill is supposed to cost just under $900 billion. Sure, that's a lot of money — but it still badly understates the true cost.

The CBO provides 10- year projections of a bill's cost. But most provisions of the health bill don't take effect until 2014. So the "10-year" cost projection only includes six years of the bill.

Plus, the costs ramp up slowly. In its first year, the House bill would only cost about $6 billion; in its first three, less than $100 billion. The big costs are in the final years of the 10-year budget window — and beyond. In fact, over the first 10 years that the House bill would be in existence (2014 to 2024), its costs would be closer to $2.4 trillion. Similarly, the real cost of the Senate bill over 10 years of operation is estimated at $1.5 trillion.

Worse, the trajectory of the costs after 10 years rises dramatically — meaning "reform" would cost even more in its second 10 years and beyond.

Such gimmicks also infest the projections of how much reform will add to the deficit. CBO says the House bill adds $235 billion to the deficit. But that, again, cuts off arbitrarily in 2019. Beyond that date, the bill adds enormously to the deficit, about $1.5 trillion in the second 10 years. In fact, if the health-reform bill were treated like other entitlements, such as Social Security and Medicare, which are required to have a 75-year actuarial forecast, its unfunded liabilities would exceed $9.2 trillion.

Of course, the Senate Finance Bill is supposed to be deficit-neutral. But that claim relies on other forms of budgetary flimflam.

For example, the Senate bill relies on Medicare "savings" that Congress keeps refusing to make. Specifically, Medicare has long been ordered to cut 21 percent from what it pays health-care providers — yet, each year since 2003, for reasons both good and bad, Congress has voted to defer the cuts.

Does anyone else really think that Congress is simply going to slash payments to doctors and hospitals by 21 percent across the board?

Of course, President Obama has long said we can cut Medicare by $500 billion simply by eliminating fraud, waste and abuse. That would be the same "fraud, waste and abuse" that the government has been cutting since Ronald Reagan first used the term.

The truth is that health-care reform is going to cost us a lot. And we're going to pay for it in higher taxes and more debt.

No wonder they don't want us to know.

President Obama has clearly been studying at the Lewis Carroll school of oratory.

During his blitz of Sunday's morning news shows, the president told ABC's George Stephanopoulos that his proposed mandate for every American to buy health insurance — policies that offer a specific, government-designed minimum-benefits package — is not a tax increase.

Not only that, he said, but no one thinks it is.

No one? Well, that would come as news to most health-care economists, who are nearly unanimous in calling such mandates "taxes."

Princeton University's Uwe Reinhardt, generally seen as the dean of health economists, writes: "[Just because] the fiscal flows triggered by a mandate would not flow directly through the public budget, does not detract from the measures' status as a bona fide tax."

Think of it this way: If the government took money directly from you, then turned around and gave it to an insurance company, everyone would agree that you've been taxed. How is that any different from the government mandating that you pay the insurer directly? At the end of the day, you still have less money to spend the way you want.

The No. 1 reason why today's uninsured say that they haven't bought insurance is that they can't afford it. Now the president is going to force them to either buy it — or pay a penalty (another non-tax, according to the president).

That penalty would be 2.5 percent of a person's income under the main House bill, and up to $1,900 for a family under the bill emerging from the Senate Finance Committee.

Sure, some of those people may have some of their costs offset by subsidies — but many will be considerably worse off. Will they be happy just because the president says it's not a tax?

There's more: Obama's mandate doesn't just hit today's uninsured: It zings anyone whose policy doesn't match the government-set specifications. If you're not paying for the benefits that Congress (or bureaucrats working at its direction) insists on, you'll have to switch to a new policy — probably a more expensive one.

That's more Americans who'll have to pay more — and keep less of their own money. But, hey, Obama says it's not a tax.

Of course, if my health-care bill already had more than $700 billion in direct taxes, as does the House bill, or included a 40 percent tax on some insurance plans, as does the Senate Finance Committee proposal, I wouldn't want to admit that even more taxes are hidden in the plan, either.

Nor should we forget the other mandate the president supports: a requirement that employers offer insurance to their workers.

Because insurance costs businesses, on average, about $12,000, the president will be raising the cost of hiring a worker by $12,000. Employers will have to offset that cost somehow, whether by lowering wages, cutting future pay increases, cutting other forms of compensation (good-bye, 401(k) match; so long, credit union) or benefits like vacation or retirement contributions — or by laying off workers or not hiring back workers they've laid off during the recession.

Whatever the mix of employer responses, at the end of the day, workers will be worse off. Well, at least they won't have been "taxed."

And, as with the individual mandate, this won't just affect companies that don't offer insurance now. Firms will have to switch from their current plans to the new, more expensive government-designed plans.

Of course, at least one prominent economist has said that such an employer mandate "is just like a tax from both the employer and employees' point of view."

The "nobody" who said that was Larry Summers, chairman of President Obama's Council of Economic Advisers.

In addition, you learned that the federal government (i.e., taxpayers) now owns (primarily through Fannie Mae and Freddie Mac) or insures (through the Federal Housing Administration and other government programs) about 80 percent of the $14.6 trillion of home mortgages outstanding in the United States. Last week, Congress passed a bill requiring all student loans be made by the federal government rather than banks, which means the taxpayers will be 100 percent liable for any student loan defaults.

You also learned that the Federal Deposit Insurance Corp. is considering tapping its Treasury credit line for up to $500 billion. It needs to do this because of the high number of bank failures and because each bank account is insured by the government (i.e., taxpayers) up to $250,000. The president and many in Congress are calling for a roughly $1 trillion health care bill — paid for by additional debt and/or more taxes, which will further slow economic growth, eventually leading to even more debt.

Finally, you also became aware of the following facts: Federal government expenditures are growing far faster than the economy, and thus the government is becoming a larger and larger share of gross domestic product. Obviously, this cannot continue forever because eventually the government would totally drive out the private sector.

The entitlement programs (i.e., Social Security, Medicare, Medicaid, etc.) all continue to grow faster than the economy, and they will take more than 100 percent of all federal tax revenue this year, requiring that virtually all of the other government spending programs, including defense and interest payments on the debt, be funded by more borrowing.

You are also aware that the government cannot tax its way out of the deficit situation, because increasing income tax rates on the upper income people will both slow the economy and cause them to find legal or illegal ways to avoid the tax increase, and the politicians have pledged to not increase taxes on those making less than $250,000, which includes all but a very few Americans.

Even if the politicians break their pledges not to increase taxes, they still cannot solve the deficit problem as long as they refuse to cut back on the growth in Social Security, Medicare, and Medicaid — because any new tax revenue will be quickly absorbed by the growth in spending. The best that any tax increase could do is delay the explosion of the debt bomb by, perhaps, a couple of years while further weakening the economy and job growth.

Now suppose you are not an individual bondholder but the Chinese government official responsible for the Chinese economy, and you know your government holds about $1 trillion in U.S. government securities. You have watched Congress and the administration become less and less fiscally responsible — more spending, more taxes, and more debt.

Then suddenly the administration puts punitive tariffs on your tire manufacturers while at the same time refuses to approve the trade treaties with Colombia, Panama and South Korea that have been negotiated.

You understand that these foolish and destructive actions by U.S. government officials indicate it does not understand the importance of free trade in fostering economic growth, and seem to be intent on replicating the mistakes of the 1930s.

The Chinese are not stupid, and they have been vocal in saying they are concerned that U.S. policies will lead to a further fall in the dollar and higher rates of inflation, both of which undermine the value of their investment in U.S. government securities.

The Chinese are now trying to diversify their holdings — and their recent activity in buying large quantities of tradable commodities is probably, in part, a hedge against a falling U.S. dollar. Thus, at the same time, the U.S. government needs to sell trillions of dollars of new bonds. It is by its own actions driving away foreign purchasers of bonds, which can only result in higher interest rates in the United States, which will further slow economic growth.

What is particularly frightening is that neither political party has offered a serious plan to defuse the debt bomb. The Democrats are just piling up more debt as if there were no limit, and the Republicans, to date, are only proposing measures to reduce the increase, rather than reverse it. When the debt bomb explodes — within the next one to three years — expect to see record high real interest rates and/or inflation, coupled with a collapse of many "entitlements." It will be like the neutron bomb, the buildings will be left standing, but the people will not.

The key to making effective health care policies is to get the economics right: Unfortunately, several areas of the president's approach get the economics wrong.

Insurance companies are in the health-insurance business to make a profit. Kill their profitability and the capital they employ will migrate elsewhere, creating exactly the opposite outcome: higher insurance costs and even more uninsured individuals.

But under the mantle of "greater stability" for the already insured, the president rattled off a series of stricter regulatory measures concerning coverage for pre-existing health conditions, preventive treatments, the use of health ratings, continuation of coverage upon losing or changing jobs, limits on out of pocket expenses and so on.

Sure, insurance companies attempt to improve their risk pools by basing premiums and coverage on health conditions. But this encourages people to live healthier lives for lower premiums, costing the system less. Imposing more stringent regulations will only induce higher premiums and fewer people will be able to afford private coverage, whether individually or through their employers.

For the uninsured, the president offers insurance coverage at competitive prices through new health-insurance exchanges — including a publicly funded option. According to the Congressional Budget Office, the per-capita subsidy for this would equal $4,600 in 2014, rising to $6,000 by 2019. Multiply those numbers by the 30 million or so uninsured citizens and we're talking about rather massive increases in annual deficits.

The president claimed that the subsidies and the public plan option offered to the uninsured would be paid for out of premiums, cost savings from eliminating fraud and abuse and new taxes on insurance and drug companies and expensive health plans. New taxes on individuals would not be used. However, the president offered no concrete solution or mechanism to achieve cost savings. Moreover, the public insurance agency's "not-for-profit" operation will render private insurance companies uncompetitive — with the (un)intended consequence of driving them out of business rather than increasing competition. Indeed, evidence from expansions of Medicaid coverage shows that take-up by the uninsured — those whom the expansion targets — is small, but the shift by those already insured from private to public insurance is very large.

Then there's the canard that the young impose costs on others by opting out of health insurance. In fact, the likelihood of requiring health insurance is extremely low for those younger than age 45. Their choice to forgo health insurance reflects a reasonable assumption of risk. If they fall sick, they can access the emergency room at a cost to others. But this cost source is small, contrary to the president's claim. A recent study by Jonathan Gruber of MIT shows that for physicians' services, about two-thirds of the uninsured pay list prices whereas the insured pay much lower prices. Indeed, even accounting for those uninsured people who don't pay, the uninsured as a whole do not impose net costs on the rest.

If the young were forced to purchase insurance, they would be charged a premium based on the population's average probability of falling sick, and the average cost of treatment (given sickness) for the general population — both of which are much larger than the average likelihood and cost for the young alone. Thus, the premiums that young uninsured people would have to pay would be much larger than those reflecting their actuarially fair costs of coverage. In effect, they would be paying the fair premium plus a hidden tax. Meaning the young would be taxed to pay for care services to the old, the nonsmokers for the smokers, the salad-eaters for the Big Mac eaters and so on.

The president strongly and correctly criticized the use of the term "death panels." We believe that term to be a misnomer for a necessary mechanism — to make choices about public funding for treatments under specific conditions, rationally considering the health benefits that would result from the costs incurred. But the president trotted out the same mechanism to achieve this goal — a medical advisory panel — that the Congressional Budget Office has declared would be ineffective.

The one item we agree about with the president is that Medicare and Medicaid costs are rising too rapidly. Unchecked soon, they could drive out other public services or cause taxes to rise to economically destructive levels. Without an effective mechanism to reduce health care cost growth — especially in the government's large entitlement programs — we will eventually be forced to adopt what really would be appropriately named "death panels": Limits on public coverage and treatment determined not rationally, but arbitrarily.

It's clear that reining in "auto-pilot" entitlement expenditures is the key to sustaining balanced future provision of public services and ensuring a robust economy. Unfortunately, the president's speech provides yet another example of politicians adopting soaring rhetoric designed to soothe us into accepting half measures, hidden taxes and un-needed programs. Rather than cutting existing and overextended budget commitments, the president's approach would dig a deeper fiscal hole.

But now the auto industry is worried about the inevitable post-subsidy drop in sales. Jeremy Anwyl, CEO of the automotive research group Edmunds.com, observes: "Nice party, but the hangover is awful."

There's also an impending downturn in the auto repair industry. There will be fewer used cars to sell and service because the clunkers program required the traded-in vehicles to be crushed. And if you rushed to buy a new car, there's a good chance you and others had to put off some other purchases.

The green eyeshade folks say the government shouldn't waste money like this in the future. But in the new ultra-Keynesian, post-budget deficit age, we need to think outside of the box. We need to expand the ambit of cash-for-clunkers.

Let's start big. The housing market remains in the doldrums. So why not a housing "cash-for-hovels" program? Trade in your old, environmentally poor house for a new, energy-efficient home and get a voucher for the value of your current property, plus $50,000. The developer would be responsible for putting the wrecking ball to your old residence; the government would keep the land for subsequent resale.

With the rise of the Kindle, online books are a reality. So we need a bucks-for-books program for dusty old books, which have occasioned the death of so many trees. Buy a Kindle and get a $20 check for every book you turn in while purchasing the new online version. Amazon.com would be responsible for creating central collection points, where books would be dumped after being torn in half to render them unusable.

The program also could be adapted for the antique and collectibles markets. A great deal of money, time, and resources are wasted as people shop in person and troll online for goods produced long ago — meaning no jobs are created today.

Turn in your antique painting, chess set, silver service, china cabinet, stein, armoire, jewelry, and more, and the government could pay you the value of your item plus provide a voucher for 10 percent of the purchase price of a modern replacement.

Uncle Sam would take title of the goods, for possible display at the Smithsonian. Constructing several new buildings to house the government's new acquisitions would generate additional jobs.

Let's not leave out airplanes. With the downturn in air travel, there is a surplus of older, less fuel-efficient aircraft. The government should provide a (large) check whenever an airline trades in an old aircraft for a new (preferably Boeing) plane. The discards could be used by the Pentagon for target practice. We'd have a stronger national defense as well as less pollution, reduced fuel consumption and more jobs.

Finally, let's eliminate the build-up of fatty, and calorie-filled snack products in cabinets and refrigerators across America in a cash-for-calories plan. Bring in your potato chips or candy and get a check for their value, plus a coupon for use towards the purchase of apples, carrots or Brussels sprouts. Surrendered foods would be used by the surgeon general in an educational campaign against obesity.

And why stop with economics? Let's apply the concept to Capitol Hill. Toss out your clunker of a congressional representative and then — and only then — get some federal pork for your district. Talk about a clunkers program that would benefit America.

It has been known since the early 1980s that the U.S. federal budget embodies a large structural imbalance — one that persists through the economy's ups and downs. In 1980, Ted Kennedy referred to this during his campaign for the presidency; Bush I, Clinton, Bush II, and Obama commented on it during theirs.

Estimates of how large this imbalance is, and of what it would take to solve it, have been available for two decades. These analyses consistently show two things: It would be costly to put off dealing with the problem, and federal debt will surge once the baby-boomers begin to retire during the late 2000s.

They are retiring now.

When questioned on entitlement reforms, legislators dutifully genuflect to the need for policy adjustments. But until now, that budget fix was one for the future. Immediately after being elected, lawmakers adopted a "business as usual" attitude, seeking more benefits for today's voters by appropriating vast sums for their pet projects.

And again, in the aftermath of the 2008 financial meltdown, policymakers on both sides of the aisle scrambled to bail out banks, automakers, insurance companies, traders, consumers, and so on, and the Fed injected huge amounts of cash into the financial markets. The cherry on top of this spending binge is the Obama administration's proposed health-care "reform" — which entails additional trillions of dollars.

The recent announcement that U.S. deficits will total $9 trillion over the next ten years suggests that "business as usual" will rapidly come to an end. That's the problem with long-term budget constraints — they inexorably draw closer, eventually forcing hasty and ill-conceived policies via a budget crisis.

What to do?

Estimates from the Social Security and Medicare trustees and the Congressional Budget Office, academic studies, and other reports suggest that the total federal fiscal imbalance amounts to 8 percent of future U.S. productive capacity. Since only about one-half of the nation's total income is subject to taxes, Americans would have to immediately and permanently devote another 16 percent of their taxable incomes toward resolving it.

Is this a feasible solution? Probably not. It's unlikely that Americans are willing to bear the additional tax burden. Also, tax increases tend not to increase government savings; Congress quickly dissipated post–Cold War budget savings through tax cuts and rapid growth in government spending. And higher taxes would significantly erode individuals' incentives to work and save, start and expand businesses, hire workers, and so on.

If tax increases aren't the answer, reduced government spending has to be. Of course, this will impose direct costs on the primary beneficiaries of government transfers and other public programs, which is politically unpopular.

I've heard many a policy analyst around D.C. say that budget reform will become politically feasible only when a cash crisis becomes imminent. For example, the last major reform of Social Security was enacted in 1983, when the program's trust fund was on the brink of exhaustion. But lurching from crisis to crisis is not a desirable or fair way to exercise stewardship over the nation's fiscal affairs.

Others suggest that the economic implications of fiscal adjustments won't necessarily be bad — that excess federal obligations can be simply "inflated away." True, if the federal debt grows too large, the Fed can print money to pay it, and ignite higher inflation in the process. But this is not an effective way to balance the budget as a whole, because large parts of the budget can't be inflated away in this manner: Social Security benefits are indexed against inflation, and federal health-care benefits are provided in-kind. The inflation rate required to compensate for this problem would be huge.

Further, when used this way, inflation is just another tax — instead of taking citizens' money away to pay the government's debt, it makes citizens' money worth less to shrink the value of the government's debt — and it can discourage productive activity just as much as other taxes can.

Just as preventing obesity by avoiding fatty food makes more sense than losing weight after the fact, it would be better for our economic health to proactively slow debt accumulation — preferably by gradually reducing future federal spending commitments — rather than risk the debilitating consequences of sky-high taxes, runaway inflation, or even federal defaults.